Advanced Search
MyIDEAS: Login to save this paper or follow this series

Relative Risk Aversion And The Transmission Of Financial Crises

Contents:

Author Info

  • Melisso Boschi

    ()

  • Aditya Goenka

    ()

Abstract

We study how investor behaviour affects the transmission of ?financial crises. If investors exhibit decreasing relative risk aversion, then negative wealth shocks increase the risk premium required to hold risky assets. We integrate this into a second generation model of currency crises which allows for a competitiveness e¤ect and for contagion through changes in fundamentals. The investor behaviour can lead to the transmission of ?financial crises even in the absence of the competitiveness effect, and makes multiple equilibria more likely. The possible stabilization effects of capi- tal controls and a Tobin tax on the international transmission of ?financial crises are also studied.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://cbe.anu.edu.au/research/papers/camawpapers/Papers/2007/Boschi_Goenka_282007.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Cama Admin)
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2007-28.

as in new window
Length: 28 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:een:camaaa:2007-28

Contact details of provider:
Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 0200
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Email:
Web page: http://cama.crawford.anu.edu.au
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Reuven Glick & Andrew K. Rose, 1998. "Contagion and Trade: Why Are Currency Crises Regional?," NBER Working Papers 6806, National Bureau of Economic Research, Inc.
  2. Reinhart, Carmen & Kaminsky, Graciela, 1998. "On crises, contagion, and confusion," MPRA Paper 13709, University Library of Munich, Germany.
  3. John Y. Campbell & John H. Cochrane, 1994. "By force of habit: a consumption-based explanation of aggregate stock market behavior," Working Papers 94-17, Federal Reserve Bank of Philadelphia.
  4. Goldstein, Itay & Pauzner, Ady, 2004. "Contagion of self-fulfilling financial crises due to diversification of investment portfolios," Journal of Economic Theory, Elsevier, Elsevier, vol. 119(1), pages 151-183, November.
  5. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
  6. Boschi, Melisso, 2004. "International Financial Contagion: Evidence from the Argentine Crisis of 2001-2002," MPRA Paper 28546, University Library of Munich, Germany.
  7. Franklin Allen & Douglas Gale, 1999. "Financial Contagion," Levine's Working Paper Archive 2092, David K. Levine.
  8. Galindo, Arturo & Panizza, Ugo & Schiantarelli, Fabio, 2003. "Debt composition and balance sheet effects of currency depreciation: a summary of the micro evidence," Emerging Markets Review, Elsevier, Elsevier, vol. 4(4), pages 330-339, December.
  9. Fernando A. Broner & R. Gaston Gelos & Carmen M. Reinhart, 2005. "When in Peril, Retrench: Testing the Portfolio Channel of Contagion," Working Papers 207, Barcelona Graduate School of Economics.
  10. Marcello Pericoli & Massimo Sbracia, 2001. "A Primer on Financial Contagion," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 407, Bank of Italy, Economic Research and International Relations Area.
  11. Campbell, John, 1993. "Intertemporal Asset Pricing Without Consumption Data," Scholarly Articles 3221491, Harvard University Department of Economics.
  12. Cordella, Tito, 1998. "Can Short-Term Capital Controls Promote Capital Inflows," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2011, C.E.P.R. Discussion Papers.
  13. Chari, V. V. & Kehoe, Patrick J., 2004. "Financial crises as herds: overturning the critiques," Journal of Economic Theory, Elsevier, Elsevier, vol. 119(1), pages 128-150, November.
  14. Jeanne, Olivier, 1997. "Are currency crises self-fulfilling?: A test," Journal of International Economics, Elsevier, Elsevier, vol. 43(3-4), pages 263-286, November.
  15. Barry Eichengreen, James Tobin, and Charles Wyplosz., 1994. "Two Cases for Sand in the Wheels of International Finance," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C94-045, University of California at Berkeley.
  16. Albert S. Kyle, 2001. "Contagion as a Wealth Effect," Journal of Finance, American Finance Association, American Finance Association, vol. 56(4), pages 1401-1440, 08.
  17. Claessens, Stijn, 1992. "The Optimal Currency Composition of External Debt: Theory and Applications to Mexico and Brazil," World Bank Economic Review, World Bank Group, World Bank Group, vol. 6(3), pages 503-28, September.
  18. Martinez, Lorenza & Werner, Alejandro, 2002. "The exchange rate regime and the currency composition of corporate debt: the Mexican experience," Journal of Development Economics, Elsevier, Elsevier, vol. 69(2), pages 315-334, December.
  19. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262150476, December.
  20. Bratsiotis, George J. & Robinson, Wayne, 2004. "Economic fundamentals and self-fulfilling crises: further evidence from Mexico," Journal of International Money and Finance, Elsevier, Elsevier, vol. 23(4), pages 595-613, June.
  21. Masson, Paul, 1999. "Contagion:: macroeconomic models with multiple equilibria," Journal of International Money and Finance, Elsevier, Elsevier, vol. 18(4), pages 587-602, August.
  22. Goenka, Aditya, 1994. "Fiscal Rules and Extrinsic Uncertainty," Economic Theory, Springer, Springer, vol. 4(3), pages 401-16, May.
  23. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Sources of contagion: is it finance or trade?," Journal of International Economics, Elsevier, Elsevier, vol. 54(2), pages 293-308, August.
  24. Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, Elsevier, vol. 8(3), pages 337-360, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Melisso Boschi & Stefano d'Addona & Aditya Goenka, 2009. "Testing Habits In An Asset Pricing Model," Working Papers, CREI Università degli Studi Roma Tre 0509, CREI Università degli Studi Roma Tre, revised 2009.
  2. M Boschi & S d'Addona & A Goenka, 2012. "Testing external habits in an asset pricing model," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2012-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2007-28. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cama Admin).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.